Ireland unveils tougher accountancy laws
By Kevin Smith
DUBLIN, Feb 13 (Reuters) - The Irish government said on Wednesday it was beefing up its accountancy laws, a week after two of the country's largest companies shocked investors with revelations of fraud and questions over accounting methods.
Proposed new legislation will impose additional disclosure requirements on companies and set up an independent watchdog.
Announcing the new laws, Deputy Prime Minister Mary Harney warned that failure to comply with basic principles of good corporate governance would "no longer be tolerated."
"I want Ireland to be at the forefront of best international practice when it comes to the way in which we run business," Harney, who is also Minister for Enterprise, Trade and Employment, said in a statement.
"These new mandatory requirements will ensure there is greater transparency in the commercial relationship between companies and their auditors," she added.
The new legislation is based on recommendations made by a review group brought in after Ireland's biggest financial scandal in the 1990s, when it came to light that institutions and individuals had engaged in large-scale tax evasion through the use of bogus offshore bank accounts.
The urgency of the changes was underscored last week when Allied Irish Banks revealed it had lost $750 million at the hands of a rogue currency trader at its U.S. unit Allfirst Financial Inc., casting a pall over Ireland's corporate image.
The scandal sent shockwaves through a world financial community already reeling from the bankruptcy and subsequent investigation of U.S. energy trading group Enron, and further undermined investor confidence in financial control systems.
Irish drugmaker Elan added to the gloom when it revealed off-balance sheet debts of around $1 billion, prompting an investigation by the U.S. Securities and Exchange Commission.
The changes, while broadly welcomed by the Irish accountancy profession which had helped to formulate them, were seen as more tightening up an existing drill rather than addressing major inadequacies.
"Ireland and the U.K. are reasonably ahead of the U.S. in terms of auditors and accountants," said Eamonn Higgins, chief executive of the Institute of Certified Public Accountants in Ireland.
"It's unlikely that something like Enron could have happened as easily with our current regulation," he added.
Under the new laws, Ireland's largest companies will have to set up audit committees comprising a majority of non-executive directors, and company chiefs will be required to make a positive statement on the company's compliance.
A source at one of Ireland's main accountancy institutions, who declined to be named, said she and her colleagues would have to study the proposals but added: "There was no major accounting non-compliance with regulations at Elan or AIB. There's no proof there was an accounting problem."
Another industry source pointed out the tighter rules had been in the pipeline before recent scandals rocked the market.
"What Harney is doing now is reinforcing the agenda which (the review group) set out and in a sense that agenda is the one to be pursued in the post-Enron era," he said.
Gerry Naughton of the Institute of Chartered Accountants in Ireland said he welcomed the new legislation.
(Additional reporting by Michael Roddy)
12:58 02-13-02 |
